Procurement
Acquiring goods or services needed for the project.
Make-or-buy analysis
Decision whether to perform work internally or externally.
FFP contract
Firm fixed price; contractor bears all cost risk.
CPFF contract
Cost plus fixed fee; buyer bears most cost risk.
CPPC contract
Cost plus percentage cost; encourages overspending.
CPIF contract
Cost plus incentive fee; fee adjusts with cost performance.
FPI contract
Fixed price incentive; price adjusts within limits.
Target cost
Expected budgeted cost in incentive contracts.
Target fee
Base fee before adjustments in CPIF.
Share ratio
Buyer/contractor sharing proportion on cost variance.
Actual cost
True final cost of performing the work.
Cost variance (contract)
Target cost − Actual cost.
CPIF fee
F = Target fee + (Target cost − Actual cost) × Share ratio.
CPIF final price
Final price = Actual cost + Fee.
Max fee
Upper limit of fee in CPIF.
Min fee
Lower limit of fee in CPIF.
FPI ceiling price
Maximum price buyer will pay.
PTA formula
PTA = (Ceiling price − Target price)/Share ratio + Target cost.
Contract risk allocation
How cost and performance risk is shared.
Bid evaluation
Assessing supplier proposals technically and financially.
Contract administration
Managing supplier relations during execution.
